Will Startups Get Squeezed by a Tech Hiring Binge?

Hiring activity in the technology sector is heating up rapidly, according to the Wall Street Journal and other sources in Silicon Valley. Companies such as Google, Intel and LinkedIn are adding staff at a rapid clip, and say that they intend to continue doing so over the next year. That’s good for the tech sector, which has been struggling to rebound after a downturn caused by the recession, and it’s good news if you’re an unemployed engineer or developer. If you’re a startup, however, you now have to worry about competing for staff in a rising labor market, along with your other concerns, such as staying in business, paying your phone and power bill, and so on.

On Thursday, Google told analysts on its earnings conference call that it hired 768 new employees in the first quarter, and that it expects that rate to continue, if not accelerate. “We expect to continue hiring aggressively through the year,” Google Chief Financial Officer Patrick Pichette said. Intel has also said that it plans to hire between 1,000 and 2,000 people this year, its first major hiring wave in five years, and Cisco is planning to expand its workforce by 2,000-3,000 employees as well.

On a smaller scale, LinkedIn said it’s already hired 154 people so far in 2010 after adding 184 people last year, and Twitter has boosted its headcount to 170 from about 45 in just the past year and says it plans to continue hiring. Technology recruiting firm SC Palo Alto, which places about 100 candidates a year with small and midsized companies in Silicon Valley, told the Journal that right now “it’s common for us to have an engineer with the right skills talking to three or four companies at a time.”

Is this a sustainable move in the job market? It’s a little early to say for sure. As recently as February, the economy in Silicon Valley was said to be “sputtering,” according to a report by two Valley non-profit groups. “We show no evidence that the recovery has arrived,” Russell Hancock, chief executive of one of the groups, told the New York Times. But a report released today by the Silicon Valley Leadership Group said that hiring is definitely picking up, according to the San Jose Mercury News. Over half of those companies surveyed said they expect to see job growth in their sector, compared with just 17 percent the previous year.

For startups, however, that not only puts the squeeze on the available talent pool, but also pushes the price of labor up. Which is fine if you are Google, or Facebook or even Twitter and you have lots of venture capital dollars to spend. But for those still crammed into a two-room apartment with the server in the kitchen, the days of finding talent easily — and cheaply — could soon be over.